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04/08/2014

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Which emerging countries will take over from the BRICS?

PANORAMA COUNTRY RISK - SPRING 2014

This first panorama includes a study about new emerging markets. While the 2008 - 2009 global crisis had highlighted emerging market resilience, game-changing events have taken place in those emerging countries since May 2013 indeed. The capital outflows linked to political, social and financial tensions attest to the heightened vulnerabilities of certain emerging countries. Their disappointing growth performances only confirm these, especially among BRICS’ countries.

Despite this still favorable consumption dynamic in the BRICS, they suffer from supply-side constraints: the downturn in investment is a sign that local businesses no longer have sufficient production capacity to respond to such strong demand.

Therefore, we have tried to identify which countries are likely today to take over from them, by paying particular attention to the importance of the outlook for supply and hence for production, rather than for demand and hence consumption.

To do so, we first highlighted the emerging economies whose high growth potential is accelerating. These are those with the most favorable prospects of increasing production capacity in the years to come. We then ruled out the countries which do not have a sufficiently developed financial system to support this expansion in production capacity, before turning our attention to the importance of the quality of business climate to fully exploit this potential for growth.

We identified 10 countries in the end. In five of them (Colombia, Indonesia, the Philippines, Peru and Sri Lanka), the quality of the business climate is similar to the one in the BRICS.

The business climate is more difficult in the five remaining countries (Kenya,

Tanzania, Zambia, Bangladesh and Ethiopia), so it could take more time for them to fully benefit from this high growth potential.

We also presented in this panorama, the latest adjustments of our country assessments (which measure the risk of company payment defaults in a given country) and business climate for the countries that are currently under the spotlight, like Russia, Ukraine, Venezuela, Thailand, Turkey and the United States.